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The Wizard of Odds

Like many people, Ernie Dahlman shows up at the office around 8:45, switches on his computer and spends the rest of the day making telephone calls. His office is nondescript, and so is he: blandly handsome, of average height, with an open, friendly expression and rimless glasses that give him a mildly intellectual look. He could be a travel agent, or a stockbroker, or perhaps a real-estate agent.

Actually he is one of the biggest horseplayers in the United States. Just how big is anyone's guess. In a busy year, Dahlman might bet as much as $18 million. Mostly he's concerned with races at tracks in New York and California, and he doesn't shy away from the big races. (He took a bath at the Kentucky Derby when Point Given failed, but he figures the horse, which rebounded to win the Preakness, looks good for the Belmont.) Dahlman bets so much money, in fact, that he has to avoid smaller tracks and certain kinds of bets because, in essence, he would be betting against himself.

The Suncoast Hotel and Casino, on the outskirts of Las Vegas, provides Dahlman with an office, and at this moment that's where he is, bearing down hard on the fifth race at Aqueduct. A bank of four television monitors show the action from both coasts, and his desktop computer flashes the probable payoffs on exacta bets, Dahlman's bread and butter. To cash, he must pick the first- and second-place horses in the race, in the exact order (hence the name). It's a high-risk, high-reward bet compared with win-place-or-show wagering. It pays for Dahlman's silver Corvette and his big house with a swimming pool in a gated community near the casino.

''I'm going to put a big box on the five, and do a little bit on the four, because it's a claim by Scott Lake,'' he says, quickly adding a column of figures with a pencil. The five is Top Bunk, a horse in sharp form that is stepping up in class from slightly softer competition and is the main threat to the horse Dahlman is keen on, Borntoberegal, which, as it happens, he owns a piece of.

A box is a kind of hedge. It's two bets in one (and twice as expensive as a straight exacta), and it lets Dahlman have things both ways. If his horse gets beat by Top Bunk, he still wins, although his net profit will be much less, of course, than if he took the risk of putting all his money on Borntoberegal in the win spot.

And Dahlman is not through. Scott Lake, a very successful trainer from Maryland, has been running horses in New York, at this point without much success. Hemisphere Dancer, which he recently ''claimed,'' or bought out of a claiming race, in which all the horses are for sale, does not look like much. But horses in Lake's hands have been known to experience a religious conversion, and Dahlman does not want to get burned when Lake's horses start firing. (Sure enough, Lake's horses have been winning at a phenomenal rate in recent months.) After placing a $2,400 exacta, Borntoberegal on top of Top Bunk, and a $2,000 exacta the other way around, he constructs a series of defensive bets: a $600 exacta, Borntoberegal over the four horse, Hemisphere Dancer; a $600 exacta, Top Bunk over Hemisphere Dancer; and two $200 exactas, Hemisphere Dancer over those two.

Then he watches the race. Borntoberegal breaks alertly from the gate, sets reasonable fractions and pours it on in the stretch. Top Bunk chases in second. Hemisphere Dancer flattens out in the stretch and finishes sixth. The exacta pays $12, and Dahlman collects $14,000 on a $6,000 bet. It nets him roughly $8,000.

If Dahlman does not look like a gambler, he does not bet like a gambler either. At least not like any gambler I've seen in action, most of them, admittedly, losers. In the two days I watched him bet, he never put serious money on a horse with long odds. Not once did I get the vicarious thrill of seeing him hit a 20-to-1 shot or collect on a $500, $200 or even $50 exacta. He is a plodder. And he talks like one too.

''Winter is is my favorite time of year,'' he said cheerfully. ''It's more predictable. The horses tend to be older, and you know what they're going to do. And out in Northern California it rains, and you get a lot of grass races switched to the main track, resulting in complete mismatches.''

Most horseplayers love a contentious 12-horse race with the promise of three-figure exactas and monster trifectas. Not Dahlman. ''Anyone who knows anything about gambling will tell you I'm not a great gambler,'' he says. ''What I'm good at is arithmetic. I can add and subtract.''

That's the truth, although not the whole truth. Dalhman is in the business of spotting opportunities and minimizing risk. He resembles nothing so much as an arbitrager or commodities trader, only his market is the racetrack and his commodity is Thoroughbreds. His workday is a series of 20-minute market analyses punctuated by 90-second races that yield, when the penciled calculations and racing luck harmonize, a steady profit.

At this point in his career -- he's 58 and has been betting seriously since his teens -- he has amassed the kind of bankroll that allows him to bet very conservatively and still live very well. He compares himself to the early and late Muhammad Ali. In his younger days, Dahlman spent 20 hours a day studying and playing the races, shooting for the moon and hitting phenomenal payoffs. Now, he says, he favors the rope-a-dope approach.

Every horseplayer can tell tales of woe. Some of them make you laugh. Read the comment lines in The Daily Racing Form next to the running line for a horse's past races, and you'll get an idea of the strange things that can happen when animals with a brain the size of a prune run at 40 miles per hour around an oval track. My favorites include ''stomped duffel bag near line,'' ''savaged foe'' and ''scattered geese on backstretch.'' I've seen horses round the far turn and head straight for a parking lot. I held a ticket on a 60-to-1 horse at Belmont that was ahead by seven lengths in midstretch when suddenly, for no reason, it ran right into the rail and sent its jockey sailing into the infield.

The point is, there's no such thing as a sure thing. Favorites win only a third of the time, an immutable racing statistic. Even successful bettors tear up more tickets than they cash. The trick is to cash enough tickets, at the right odds, to offset the losses and turn a profit. That's where addition and subtraction come in.

Of course, the addition and subtraction mean nothing without good information and a refined ability to size up a race and assign probabilities to various outcomes -- the arcane exercise known as handicapping. Dahlman thrives on information. He excels at analyzing a race based on that information, enriched by a lifetime of watching races. It's an art with just enough science to it to make it possible for a very tiny percentage of bettors to take money away from the herd of less intelligent, or less disciplined, bettors.

''I call him the logic doctor,'' says Chip Taylor, a buddy of Dahlman's and a songwriter whose credits include ''Wild Thing'' and ''Angel of the Morning.'' Taylor dropped out of the music scene for years to bet on the horses, often with Dahlman. ''I was good at analyzing pace and bias'' -- the tendency of a racetrack to develop fast or slow areas -- but Ernie picked up on all sorts of things, like when a horse changed from one trainer to another, whether that was a plus or minus, and the answer was not always what you might think.''

Dahlman puts it a little differently. ''I'm a MOTO player,'' he says. ''Master of the Obvious. It's just that more things are obvious to me than to most people.''

Like many other professional horseplayers, Dahlman relies in part on the work of others. The Daily Racing Form gives him a compressed description of the last dozen races run by each horse entered in a race. That merits a quick glance. The more serious numbers come from ''the sheets.''

Published by a professional horseplayer and Marxist named Len Ragozin, they go a long way toward solving an age-old handicapping problem. By analyzing and quantifying a variety of factors, ranging from track resiliency to wind direction to the distance actually traveled by each horse, they assign a speed rating to a horse's performance.

The Ragozin sheets are shipped to Dahlman every day, overnight, and one of his rare visits to the casino floor is his daily walk past the sports-betting operation on the main floor to a little office that holds his packet of sheets. The raw speed numbers Dahlman accepts as highly accurate. Other assumptions in the sheets he rejects, like Ragozin's opinions about which horses are likely to regress, or bounce, after turning in a stellar performance.

Dahlman also pays close attention to pace, or the time for each quarter mile of a race, which he jots down in one of two fat, spiral-bound notebooks. The other is devoted to his overriding preoccupation, horseshoes. Years ago, Dahlman began noticing something funny about horses equipped with mud calks, cleats that some trainers use for extra traction when rain turns dirt into mud. Dahlman noted that even when rain failed to materialize, a lot of horses seemed to improve several lengths when wearing mud calks for the first time.

He began keeping detailed records, and he now considers it his biggest edge. It's the reason he loves Golden Gate Fields, near San Francisco. It rains a lot there, so plenty of mediocre-seeming horses are switching to mud calks for the first time and then sneaking into exactas at good prices. A second reason for loving Golden Gate is that the track posts very detailed shoe information before each race. Not all mud shoes are created equal, in Dahlman's view. Mud nails, which turn shoes into a kind of hobnailed boot, make no difference, in his opinion. But jar calks, which have a kind of high heel, do. The New York tracks do not provide detailed shoe information, so 10 minutes before every race, the phone in Dahlman's office rings. It's a man named Gene (Dahlman professes not to know his last name), a sharp-eyed informant in New York who stands by the paddock with a pair of binoculars and relays shoe information to Dahlman.

''No one,'' says Chip Taylor, ''has made as much money off shoes as Ernie has.''

So why doesn't everyone do the same thing? Because in the handicapping game, not everyone believes the same things. Len Ragozin swears by the bounce. Many handicappers look feverishly for signs of a developing bias. Steven Crist, the editor and publisher of The Daily Racing Form and a big bettor, says that biases are greatly overrated. And so on and so on. Every successful horseplayer has his idiosyncrasies. Dahlman's is horseshoes. And if he's beating the game, who's going to tell him he's wrong?

Dahlman grew up in Patchogue, Long Island, where his father, Ernest Sr., owned a delicatessen and spent his free nights betting the trotters at Roosevelt Raceway. Ernest Jr. tagged along. In time he became fascinated by the challenge of finding patterns in the seemingly random circulation of horses around the track. Poring over old programs in his basement, he set about cracking the code.

By the end of high school, Dahlman was hooked. He made a halfhearted attempt at college, enrolling in Alfred University with the object of becoming a ceramics engineer. ''It wasn't until I was 40 that I finally found out what a ceramics engineer actually is,'' he says. He shambled along, then transferred to Wagner College on Staten Island. He dropped out of the economics program when he realized he would eventually have to write a term paper.

His education at the harness tracks was going great, however. In 1964, the summer after he dropped out of Wagner, Dahlman created a stir when he hit a complicated bet at Yonkers Raceway called the twin double -- two linked daily doubles, or four races -- and earned a record payout for the track of $171,084.60. The local press went wild over the whiz kid with the glasses.

Dahlman went right back to the racetrack and hit the twin double the next night. ''Twin Double Winner Does It Again!'' shrieked the headline in The Daily News. This time, the national press jumped on the story. Time magazine featured Dahlman in its college-life section, headlining the story ''Success on the Oval Campus.'' The New York Post hired him as its harness handicapper for $50 a week. The world lost a ceramics engineer.

''I didn't want to be a horseplayer,'' Dahlman says. ''I know my mother was upset. But I kept making money at it. It's a ridiculous choice of occupation that's worked -- so far.''

In the early 1980's, with harness racing in steep decline, Dahlman shifted his action to the Thoroughbred tracks, where he had to learn a brand-new game, one with many more variables. ''It's the difference between checkers and chess,'' he says. Sometimes he won, sometimes he lost. But mostly he won. Even more surprisingly, in a profession populated by misfits, losers and borderline sociopaths, he managed to live a normal suburban life. He married twice and reared six children, none of them gamblers.

He also diversified his portfolio, so to speak. Dahlman and Eugene Hauman, a childhood friend, started buying and running trotters in the 1960's and 1970's. In the early 1990's, they turned to Thoroughbreds, and in 1993 the two men became the leading owners on the New York Racing Association circuit, winning 55 races. Today, the two men own dozens of horses in partnership with Barry K. Schwartz, the chairman and chief executive officer of Calvin Klein Inc. Dahlman's daughter Jennifer Gurney manages Schwartz's 800-acre horse farm in Westchester. He pays taxes like any self-employed businessman, declaring income (winning bets) and writing off losses (losing bets). He bets somewhere between $10 million and $18 million a year. His actual income depends on racing luck. He has had losing years. But on average, he says, he earns 3 or 4 percent on his investment. In a good year, that would give him a pretax income of about $700,000. That does not include income from the horses he owns.

Dahlman lived on Long Island until the mid-90's, when New York State racing authorities dealt him (and other big horseplayers) a stunning blow. They raised the takeout on exacta bets from 17 percent to 20 percent. Takeout is the amount that a track skims off the top of a betting pool to finance its operations. It's the hurdle that bettors must clear before they can earn a profit. The 3 percent increase represented at least $300,000 a year to Dahlman, who did his betting at a teletheater in Happauge. Dahlman did a little adding and subtracting, then took his money and moved to Las Vegas, where the casinos were famous for striking agreeable deals with big bettors.

Dahlman settled in at the Sands. After the Sands was demolished, he switched to the Suncoast, a casino that caters to locals. His arrival was, to put it mildly, unheralded. One day, when the casino was offering free pastries to customers who signed up for a handicapping contest, Dahlman drifted over and asked if he might have a doughnut, even though he wasn't interested in the contest. No dice. Ernie Dahlman, as high a roller as walks into the casino, could not score a 50-cent freebie.

As it happens, Dahlman was mired in a slump during the two days I spent with him at the Suncoast. Consequently, he was betting light, about $40,000 a day. He lost about $7,000 the first day I watched him, and the second was no better.

There were some tough beats. Rocking Ruby, in the ninth at Aqueduct the second day, got stuck behind tiring horses, had to switch paths and by less than a length missed cracking the exacta at odds of 5 to 1. Another of Dahlman's picks was disqualified from a winning exacta after bumping a rival just steps from the finish line.

Most bettors would be chewing the carpet or throwing heavy objects at the television screen. Dahlman reacts to victory and defeat with Spock-like equanimity. Occasionally he will worry out loud. ''I'd like to see the five horse closer up,'' he might say. Or, ''Uh-oh, I'm gonna get beat.'' After the disqualification, he clenched a fist, glared at the screen and said softly, ''Gosh DARN it.'' Then it was on to the next race.

''If I keep my losses at $7,000, I can sleep easily,'' Dahlman says. ''I can get that back in one race.''

The playing field is constantly changing, though. An unidentified man betting through an off-track location in North Dakota uses a computer program that searches betting pools for anomalies, then places hundreds of bets on as many as seven horses in a race in a matter of seconds. The ''professor,'' as Dahlman calls him, places huge bets -- including $215,000 on Monarchos to win the Florida Derby -- and as far as anyone can tell, makes money (as he did on that race with Monarchos). ''This guy is good,'' Dahlman says. ''Fortunately he does not seem to bet at the same tracks I do.''

A few days after leaving Las Vegas, I called Dahlman to see if he was faring any better. ''I'm on fire,'' he said. He sounded almost apologetic about hitting the Pick Six at Aqueduct, a bet in which players must call the winners of six consecutive races. Dahlman put together a $1,000 ticket and, because the pot had swollen after no one hit the jackpot two days in a row, earned $26,000. More important, his day-in, day-out exactas were coming in. Life was back to normal.

His life, anyway. After watching Dahlman in action, I decided to apply his methods. Like many small-time bettors, I sneer at short prices, scoff at exactas paying less than $50 and never bet on a favorite. But I've been having doubts. Why not try to do it the Ernie way?

I plunked down $35 at the one Manhattan newsstand that sells the Ragozin sheets and set about deciphering the numbers for Aqueduct. The next day, I showed up at the Winner's Circle, a teletheater in Manhattan's garment district, carrying the astronomical sum of $1,000 provided by my naïve employers, five times the maximum I would bet with my own money. Just carrying the cash made me nervous.

What followed was a date that will live in infamy. To test the waters,

I organized a bet in the second race focusing on a horse, Supernal, that had scored a good sheets number in its last race, when it had raced very wide and rallied mildly for third place. I bet a $50 box using Supernal and Romantic Novel, a horse that had finished second in its last three races. As a defensive measure, I bet a $20 exacta of Miss Mickey, a horse recently transferred to the trainer James Jerkens -- and, I failed to note, wearing mud calks for the first time -- over Supernal. I also did a $10 box, Miss Mickey and Romantic Novel. Miss Mickey, the favorite at 6 to 5, broke quickly and never looked back. Supernal, at odds of about 5 to 1, closed with painful slowness to get the place spot, and Romantic Novel, as the chart for the race put it, ''posed no threat.'' The exacta paid $18. My $20 saver gave me $180, a $30 profit on a bet of $150. I could live with that.

It was downhill from there. Near misses, wild long shots and strange tactical decisions by a few jockeys played havoc with my conservative betting strategy. Wicklow Warrior, which looked as if it could crush the competition in the fifth race, was rushed to the front and contested a hot pace, for no reason that I could see. It tired and finished next to last, taking my $220 with it. I picked a nice-priced winner in the next race, Worthy Crane, but failed to match it up with the right horse in the No. 2 slot. The exacta paid $89 for a $2 bet. I collected zilch on $250 in bets.

I discovered several things very quickly. First, adding and subtracting two minutes before a race is no small skill. I could not do it fast enough to construct a logical hedge. Second, big bets rattle me. When several hundred dollars go down the drain, I start flailing and stabbing, desperate to pull even. By the ninth and final race, I was down to about $10. The money had disappeared faster than butter hitting a hot frying pan. Third, the Dahlman method is not a method, like counting cards at blackjack. It's a lifetime of racing knowledge. And I'm too old to learn.

There was some consolation. I called Dahlman to describe the debacle. He cheerfully told me that he had lost $30,000 the same day. He could afford to laugh. He's well ahead for the year. ''The first two races today,'' he said, ''I lost $12,500, and I thought: What am I doing? Nothing is going right; why am I here?''

Then he hit a $213 exacta at Keeneland in Kentucky that erased the deficit in the blink of an eye. ''The winner was 18 to 1,'' he said. ''When that happened, I said to myself: 'Yeah, I'm in the right place. I belong here.'''